Crude Oil Drops to $70, but Polyester Filament Holds a Premium: The Supply-Demand Mismatch in the Polyester Chain

Crude oil has fallen back to $70, yet polyester filament yarn still carries a premium of nearly 1,000 yuan per ton. By June 26, US WTI crude was hovering around $70, almost back to pre-crisis levels, while polyester yarn prices remain significantly above their pre-war benchmarks. This gap is not a simple lag in adjustment—it reflects a standoff between two sides of the value chain, each calculating its own risks.

The Cash Flow Paradox Behind the Price Gap

On the futures market, PTA and ethylene glycol have essentially returned to their starting points, but polyester filament has been slow to follow. The reason lies in the cost structure of polyester mills: while their cash flow looks healthy on paper, the inventory they hold was produced during the high-oil-price period. Industry data shows POY inventories at 30 days, FDY at 35.7 days, and DTY at 41.8 days. Marking down prices would turn unrealized losses into real ones.

The mills' strategy is clear: keep operating rates low, reduce prices slowly, and sell gradually. On June 24, the capacity utilization rate for domestic direct-spun polyester filament was only 73.81%, a slight increase of 0.29% from the previous week but still near a three-year low. Low operating rates ease the pressure to sell, giving mills room to hold prices.

Weavers' 'Buy Only When Necessary' Stance

For weaving enterprises, the high cash flow margin in polyester yarn signals that prices are likely to fall further. Unless they have orders to fulfill, they prefer to wait another month—a delay that could save hundreds or even thousands of yuan per ton. This 'buy only when necessary' mentality directly suppresses actual demand for polyester yarn.

Weak domestic demand amplifies the wait-and-see attitude. Unseasonably cool weather has delayed the start of summer seasonal categories like sun-protective apparel. In late June, a period that should be peak season, end-user orders remain sluggish, leaving weavers with little incentive to stock up on expensive raw materials.

Supply-Demand Imbalance and the Export Wildcard

The core issue is a supply-demand imbalance compounded by weak domestic consumption. But there are glimmers of hope. With the full reopening of the Strait of Hormuz shipping channel, global crude and commodity trade is gradually normalizing. Faster economic recovery in several overseas economies could revive international textile demand.

If export orders pick up, they could offset some of the domestic weakness and ease downward pressure on the polyester yarn market. However, this positive signal will take time to ripple through the supply chain. In the near term, the pattern of weak demand and wide price gaps is likely to persist.

Practical Recommendations

For Buyers - Current polyester yarn prices remain elevated; unless orders are urgent, delay purchases and wait for mills to cut prices to reduce inventory. - Monitor capacity utilization: a further drop in operating rates may signal stronger price support, presenting a good opportunity to restock. - Prioritize smaller polyester mills with greater cash flow pressure, as they are more likely to offer discounts.

For Exporters - Overseas economic recovery could drive new orders; consider early preparation for autumn/winter fabric procurement to lock in lower raw material costs. - Track the Strait of Hormuz shipping recovery closely—if crude remains low, polyester cost support will weaken further, so build price flexibility into quotations. - Adopt floating pricing mechanisms in export contracts, linking prices to raw material indices to hedge against volatility.